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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
21 April 1999 |
||
B e f o r e :
____________________
CAPE PLC | Plaintiff | |
- and - | ||
THE IRON TRADES EMPLOYERS | ||
INSURANCE ASSOCIATION LIMITED | Defendant |
____________________
Mr H Palmer was instructed by Messrs Vizards, London, WC1R 4JL, for the Defendant.
____________________
Crown Copyright ©
Mr Justice Rix:
The essential question in this action is whether the defendants, who during the policy years 1966/1971 were employers' liability insurers with an exception in respect of
"claims arising from Pneumoconiosis or Pneumoconiosis accompanied by tuberculosis"
agreed to cover, or to exclude as part of that exception, the plaintiffs' liability to employees in respect of injury or disease caused by mesothelioma. Was the term "pneumoconiosis" used as a catch-all word to cover all asbestos related disease caused by inhalation of asbestos dust ("asbestos related disease"), including therefore mesothelioma, or was it rather used in a strict medical sense as meaning fibrosis of the lungs caused by inhalation of dust, which it is common ground is a different disease from that of mesothelioma?
That question is looked at as a matter of construction, rectification, and estoppel by convention or acquiescence. If necessary, the defendants claim to be entitled to avoid the policy for non-disclosure, on the ground that, if mesothelioma was not within the exception, then the plaintiffs ought to have disclosed, but failed to disclose, their mesothelioma claims experience prior to renewals for the 1970 and 1971 policy years. The plaintiffs in their turn rely on laches, acquiescence and affirmation. The central question remains whether the parties intended, by referring to pneumoconiosis, to exclude from the policy all asbestos related disease.
The parties and the policy
The plaintiffs, Cape Plc, were formerly known as The Cape Asbestos Company Limited. Under that name they entered into an employers' liability policy no 11256 with the defendants, The Iron Trades Employers Insurance Association Limited, for the policy years 1966 through 1971. The plaintiffs and their subsidiaries have been a major manufacturer of asbestos products, and as such have acquired a deep insight into the incidence and causes of asbestos related disease. The defendants, as their name implies, provide employers' liability insurance for industrial companies. They numbered among their insureds not only the plaintiffs, but other major asbestos companies such as British Belting & Asbestos Ltd ("BBA"). They also made it their business to know about asbestos risks. They are a mutual company who return profits to their insureds in the form of premium rebates.
Prior to 1966 the plaintiffs had been insured for employers' liability with the Eagle Star Group ("Eagle Star"), apparently right back to 1913. After 1971 the plaintiffs remained insured with the defendants, but on somewhat different terms, to take account of the Employers' Liability (Compulsory Insurance) Act 1969, which took effect on 1 January 1972 (the "1969 Act"). That Act made it necessary for the plaintiffs to be insured for the whole of their asbestos related employers' liability, and as a result the exclusion contained in the policy for the 1966/1971 years had to be deleted. The manner in which this was done is a subject of some controversy and will be referred to below.
The 1966 policy insured the plaintiffs and their subsidiaries. It is probably unnecessary to name their subsidiaries other than Small & Parkes Ltd and, from the 1968 policy year when it came within the Cape group, Universal Asbestos Manufacturing Company Limited ("Universal"). These two subsidiaries, unlike other members of the Cape group, were fully insured for asbestos risks, as they had been under their previous insurances. For the rest, however, the policy contained the following insuring clause and the exception:
"NOW THIS POLICY WITNESSETH that if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of Insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Company shall subject to the terms, exceptions and conditions contained herein or endorsed hereon indemnify the Insured against all sums for which the Insured shall be so liable and will in addition pay claimants' costs and expenses and be responsible for all costs and expenses incurred with the consent of the Company...
"MEMO:
IT IS HEREBY UNDERSTOOD AND AGREED THAT
...
(4) this Policy does not indemnify the Insured other than Small & Parkes Ltd against claims arising from Pneumoconiosis or Pneumoconiosis accompanied by tuberculosis."
Typically, the policy was written on terms that the disease was "caused during the period of Insurance". With diseases such as asbestosis (strictly speaking, the form of pneumoconiosis due to inhalation of asbestos dust) and mesothelioma, with their long latency periods, claims upon the plaintiffs could occur many years, even decades, after the employee in question had begun or ceased to work in the asbestos industry. It was common ground that the latency period for asbestosis was 20 years or more in over 90% of cases, and that for mesothelioma the latency period was upwards of 10/15 years. Even cases occurring within 15 years of exposure are, however, rare, so that Dr Dewi Davies, the defendants' expert witness, described 15 years as the recognised minimum, and Dr Robin Rudd, the plaintiffs' expert witness, said that the average latency period for mesothelioma was 35 years.
When the policy was revised for the 1972 and subsequent policy years, the exception had to be removed so that the plaintiffs could comply with the new regime of compulsory insurance. Nevertheless, the plaintiffs agreed to indemnify the defendants against claims arising out of asbestos related disease. These changes were effected by the attachment to the policy of an agreed memorandum in the following terms:
"IT IS UNDERSTOOD AND AGREED THAT the Insured will indemnify the Company in respect of all sums paid under the terms and conditions of the policy that are applied to the satisfaction of claims arising from pneumoconiosis, mesothelioma and cancer of the lungs associated with pneumoconiosis."
It will be observed that "mesothelioma and cancer of the lungs" make their presence expressly felt in this memorandum for the first time. The 1972 policy endorsements are lost, so that the new memorandum exists only in draft form. It is agreed however that the relevant memorandum (memorandum 3) was agreed in the above terms and became a condition of the policy from 1 January 1972.
The 1972 policy changes were also addressed in a letter from the defendants to the plaintiffs dated 11 July 1972. The letter, also referred to as the "fronting arrangement", read in material part as follows:
"This letter sets out the understanding between The Iron Trades Employers Insurance Association Ltd., ("The Company") and The Cape Asbestos Company Ltd., ("The Insured") relating to pneumoconiosis cover with effect from 1st January 1972, as such it is in amplification of and should be attached to the above numbered policy.
"1. The Policy provides the insurance cover required under the Employers' Liability (Compulsory Insurance) Act, 1969.
"2. The Insured intends and undertakes to deal with all pneumoconiosis claims arising from its own and/or associated and/or subsidiary companies' employees, except as specified in paragraph 4 below. In particular, the Insured will be responsible for the negotiation, settlement and defence of such claims.
"3. Notwithstanding memorandum 3 attached to the Policy, it is understood and agreed that the Insured will be responsible for payment of all amounts due in respect of claims arising from pneumoconiosis under the policy.
"4. The pneumoconiosis risk to employees of Small & Parkes Limited (a subsidiary of the Insured) was covered for the period from 1st January 1966 to 31st December 1971. The Company will deal only with claims arising from such liability when the period of exposure
(a) started before 1966 and continued into the period 1966 to 1971
(b) was entirely within the period 1966 to 1971.
Claims relating to periods of exposure outlined in sub-paragraph (a) and extending beyond the 31st December 1971, will be dealt with by the Insured and the Company will pay a proportion of the cost of these claims pro rata to its period of cover.
"5. With the exception of claims of employees or their dependants of Small & Parkes Ltd., nothing in the policy or in this letter extends to the Company's liability for pneumoconiosis sustained and arising out of and in the course of employment, prior to 31st December 1971."
It was common ground before me that "memorandum 3" referred to in clause 3 of that letter was the memorandum cited above. It is clear that in the light of that memorandum, the term "pneumoconiosis" in this letter is used as a shorthand for the diseases, including mesothelioma, mentioned in that memorandum.
It will be observed from clause 2 that, with the exception of claims arising in the case of Small & Parkes, all claims handling was to be kept in house by the plaintiffs. This continued the pattern established in the 1966/1971 period. In that period, although cover had incepted with an agreement that, despite the pneumoconiosis exclusion, the defendants would provide a claims service for the plaintiffs even within the area of the exclusion, nevertheless in practice the plaintiffs kept all claims handling in house.
Asbestosis and asbestos related disease
As already stated, it was common ground that, medically speaking, pneumoconiosis and mesothelioma are different diseases. Pneumoconiosis is a fibrosis of the lung parenchyma: when caused by the inhalation of asbestos dust, it is called asbestosis. It causes fibrous (scar) tissue, leading to thickening of the lung tissue, loss of elasticity, reduction of the gaseous exchange needed for oxygenisation of the blood, and ultimately hypoxia. Fibrosis is the most general term to describe the condition; fibrosis of the lung parenchyma is called pneumoconiosis; and pneumoconiosis caused by asbestos inhalation is called asbestosis.
Mesothelioma, on the other hand, are malignant tumours which attack linings, for instance, of the lung or gut. Thus they affect the pleura or peritoneum. They are also caused by the inhalation of asbestos dust, but, like other, benign, pleural diseases caused by asbestos inhalation, such as pleural plaques, pleural effusion and diffuse pleural thickening, may be found without asbestosis. There is no difficulty in distinguishing mesothelioma and asbestosis in patients when they occur, and, save for shortness of breath in the case of mesothelioma of the pleura, their symptoms are different. The mesothelioma condition, once its onset occurs and despite its long latency period, is rapidly fatal.
In Occupational Lung Disorders by W R Parkes (Butterworth, 1974) the distinction between pneumoconiosis and mesothelioma is referred to in the following passage:
"Strictly anatomically "lung" does not include the pulmonary (visceral) or parietal pleura which is of different embryological origin from the lung; and so, primary pleural disease due to inhaled dust (for example hyaline plaque formation and malignant mesothelial tumours attributed to asbestos dust) should not be classified as pneumoconiosis."
The distinction between these diseases is recognised in the fact that they have been separately categorised as prescribed diseases for the purposes of legislation concerning workmen's compensation and industrial injuries benefit. The term "pneumoconiosis", an amalgam of Greek words for lung and dust to indicate disease of the lungs caused by the inhalation of dust, was apparently coined by Zenker in 1867. The chief pneumoconioses are coalworkers' and mixed-dust pneumoconiosis, silicosis and asbestosis. The first provision for pneumoconiosis to appear in the Workmen's Compensation Acts was in respect of silicosis in 1919. In 1931 compensation for asbestosis was made available by the Asbestos Industry (Asbestosis) Scheme. The Workmen's Compensation Act, 1943 developed a general scheme covering any form of pneumoconiosis defined as -
"fibrosis of the lungs due to silica dust, asbestos dust or other dust, and includes the condition of the lungs known as dust-reticulation".
That definition was thereafter incorporated in the Industrial Injury Acts.
Section 55 of the National Insurance (Industrial Injuries) Act, 1946 provided for the extension of insurance to prescribed diseases which ought to be treated as a risk of employees' occupations. Among such prescribed diseases was pneumoconiosis, which was defined in section 57(3) of the 1946 Act in the way set out in the previous paragraph.
Section 57(1) stated that regulations could provide that where any person was found to be suffering from "pneumoconiosis accompanied by tuberculosis", the effects of the tuberculosis shall be treated as if they were the effects of pneumoconiosis. The 1946 Act came into effect in the middle of 1948. The phrase "pneumoconiosis accompanied by tubercolosis" is reflected in the language of the policy's pneumoconiosis exception.
Such definitions were carried forward into the National Diseases (Industrial Injuries) (Prescribed Diseases) Regulations, 1959: see section 1(1) of Part I and section 36 of Part VI. These were the Regulations current at the time of the making of the 1966 policy.
There is no essential difference between the recognised medical definition of pneumoconiosis, as a fibrosis of the lungs caused by inhalation of dust, including asbestos dust, and the statutory definition. With the coming into effect of the 1946 Act in 1948, insurers developed an agreed tariff wording, which came to be known as the Asbestosis Endorsement, for the exclusion of pneumoconiosis. Its date goes back to June 1948, and it provided as follows:
"MEMORANDUM
The insurance by this Policy does not apply to or include liability in respect of pneumoconiosis or pneumoconiosis accompanied by tuberculosis.
In this endorsement the expression "pneumoconiosis" means fibrosis of the lungs due to silica dust, asbestos dust or other dust and includes the condition of the lungs known as dust reticulation."
It will be observed how this wording reflects not only the medical definition, but also the statutory language of the legislation.
Mesothelioma was not a prescribed disease at the time of the making of the policy, but it was under consideration as such, and became a prescribed disease during the first year of the policy by reason of the National Insurance (Industrial Injuries) (Prescribed Diseases) Amendment Regulations 1966, made pursuant to the National Insurance (Industrial Injuries) Act 1965. The 1966 Regulations were made on 8 August 1966 and came into operation on 22 August 1966. They amended the 1959 Regulations by adding "mesothelioma" (as the disease was described in section 2 of the 1966 Regulations) to the schedule of prescribed diseases, where mesothelioma was entered in the following terms:
"Primary malignant neoplasm of the mesothelium (diffuse mesothelioma) of the pleura or of the peritoneum."
Mesothelioma was only prescribed in relation to an occupation involving the working or handling of asbestos.
Mesothelioma was prescribed as a separate disease for the very reason that it was realised that it could arise without the presence of asbestosis: therefore, if it was not prescribed as a separate disease, a worker who suffered from mesothelioma but not from asbestosis would not be protected by the legislation.
The arrival of mesothelioma as a "new" disease was given publicity outside professional spheres by a newspaper article in the Sunday Times of 31 October 1965. The article derived from the publication of a report by Dr Muriel Woodhouse and Mrs Hilda Thompson of the London School of Hygiene and Tropical Medicine. It was only in the previous few years that the existence of the disease had been recognised, and recognised as deriving from exposure to asbestos. The article reported that the Chief Inspector of Factories had set up a committee of experts to review urgently all the evidence on the medical problems of asbestos exposure, and that the Ministry of Pensions was preparing to make mesothelioma a prescribed disease.
On 31 December 1965 the Annals of the New York Academy of Sciences printed an article by Dr W J Smither entitled "Secular Changes in Asbestosis in an Asbestos Factory". It indicated that whereas mesothelioma had barely figured at all in post-mortem results of a sample of 115 asbestos related deaths studied in the period of 1931/1949, a similar study of 71 deaths studied in the period 1957/1964 showed 2 cases of pleural mesothelioma and 13 cases of peritoneal mesothelioma. Dr Smither was the chairman of the research committee of the Asbestosis Research Council, which had been established in 1957 and whose principal members were the plaintiffs, BBA and Turner & Newall. Dr Smither worked for the plaintiffs as an expert and represented them on the research committee. A copy of Dr Smither's article was in the defendants' discovery. The defendants accepted that, because they could not establish at what time a copy of this article entered their possession, they may have had it ever since the time of its publication.
Thus the existence of mesothelioma as a separate disease arising out of exposure to asbestos, and as a disease which was under consideration as a prescribed disease, was known about at the time of the negotiation of the policy not only in professional quarters, but also among the interested public.
The making of the policy
In July 1965 insurance brokers Muir Beddall & Co Ltd ("Muir Beddall") were instructed by the plaintiffs to seek quotations from insurers for a group employers' liability policy. Previously insurance had rested with Eagle Star, although various subsidiaries had been insured by a number of different companies, eg Small and Parkes had been insured by Midland Employers. The various companies in the Cape group filled up questionnaires in which they set out the premiums charged and claims experience over the previous five years. Premiums charged were expressed as a certain percentage of the annual wage bill, which differed between manual and clerical workers. Claims were expressed by number and amount. Muir Beddall sought quotations from several different insurers. In their presentation to the defendants dated 26 October 1965 they explained that
"The asbestosis and pneumoconiosis risk is carried by the Insured, though the existing Insurers do provide a claims service in this respect. Small & Parkes Limited however have cover for some employees."
The defendants' quotation dated 18 November 1965 quoted a rate of 12/6d for all employees other than clerical workers, where the rate was 6d. The quotation stated that "Asbestosis and pneumoconiosis included in respect of Small & Parkes Limited only". The defendants' quotation was the most competitive and was accepted. On 3 January 1996 Muir Beddall informed the plaintiffs that the defendants would not insist on proposal forms being fully completed, but what they particularly wanted to know was the estimated wages on which the first premiums would be calculated. This was "minimum information", but the remainder "will be picked up in due course, during surveys". The proposal forms asked about any claims or intimation of any claims for "Silicosis, Asbestosis, or Pneumoconiosis", to which answers as appropriate were given.
The policy was signed on 16 March 1966, retrospective to 1 January 1966. The first year's estimated wages were £3,518,750 and the premium was £16,091.15.9d.
The history of the policy pending the coming into effect of the 1969 Act
In late 1967 the plaintiffs bought Universal which inter alia made asbestos cement goods. Universal was brought within the plaintiffs' policy as from 1 January 1968. Under its previous insurance, there had been no pneumoconiosis exclusion, and this remained the position when Universal was brought under the umbrella of the plaintiffs' group policy. Universal's claims record was presented to the defendants in the same way as had been done in late 1965 by the various companies within the Cape group, viz by reference to total payroll and general claims figures in which no distinction was drawn between asbestos related claims and claims of any other kind. Mr John Banham, the defendants' assistant general manager, noted with reference to the standard group rate of 12/6d to be charged:
"include asbestosis in this ins[urance] as Builders' Accident's policy included it. No change for other firms where pneumoconiosis not covered."
On 16 May 1968 an internal memorandum of the defendants records that despite their undertaking to the plaintiffs to provide a claims handling service for asbestosis claims even though such claims were (for the most part) excluded from cover,
"since then it has become the practice of the Insured to instruct their own lawyers to deal with those claims on their behalf and of course we have been content."
This appears to have been the case throughout the policy. Indeed, the plaintiffs appear to have been keen to keep within their control all aspects of dealing with asbestos related claims deriving from their employees. If possible, they sought to settle such claims without litigation and with the minimum of publicity.
In May 1968 another internal memorandum of the defendants notes that in the course of investigating a claim under the policy they were informed that there were "53 present asbestotics" on the plaintiffs' books.
In August 1969 the defendants received an important communication from Davies Arnold & Cooper ("DAC"), solicitors, dated 4 August and enclosing a letter to them from Dr Smither dated 2 August. Dr Smither had obviously been instructed by DAC as an expert on behalf of another insurance company on a claim where the claimant against the insured had claimed in respect of mesothelioma. The insurance policy concerned excluded "asbestosis", and the insurance company had consulted Dr Smither on whether that exclusion embraced an exclusion for mesothelioma. Dr Smither's letter debated the question, pointing out that "Asbestosis has always been considered as a form of pneumoconiosis, which by definition, affects the lungs" and drawing attention to the fact that mesothelioma had become a prescribed disease in its own right because cases of mesothelioma had occurred in asbestos workers where "the diagnosis of asbestosis cannot be sustained officially". He concluded: "This would appear to argue that mesothelioma is officially differentiated from asbestosis." He then referred to a working party that had been set up to redefine the definition of pneumoconiosis, eg to include bronchitis. That did not in the event occur. However, Dr Smither commented:
"...it would appear reasonable to accept that the definition of asbestosis is changing. Since, however, the insurers must surely have insured with asbestosis defined as it is now, or has been, it would appear that they must accept that mesothelioma is distinct from asbestosis."
He ended: "This is a fascinating argument." DAC (Mr Kaye) advised:
"It occurs to me that in Policies where you seek to exclude the risk of asbestosis, you should now also exclude mesothelioma as well."
DAC's letter was addressed to Mr Banham, who took the matter up within the defendants' organisation, raising the question whether the plaintiffs' policy would cover mesothelioma. He wrote -
"...I foresee they may try to push mesothelioma cases at us - perhaps a point to bear in mind for the future."
Mr Peter Cross, who was the defendants' assistant general manager, was consulted. The matter was left on the basis of a Note to file dated 20 August 1969 drawn up by a Mr F Knight, the defendants' accident manager. The Note read:
"Referring to the letter on the file from Mr. Kaye of Davies Arnold Cooper and the enclosure referred to the matter has been discussed with Mr. Cross and it was agreed that we should retain the correspondence on the file but take no further action.
"It is appreciated that the policy as it stands does not in so many words exclude any claim that maybe made by an employee suffering from mesothelioma unless this disease in itself could be construed as falling within the general description of pneumoconiosis. There is however the general understanding of the Insured that any claims made against them by employees suffering from a disease caused by the use of asbestos is something that they did not wish to fall within their insurance. We think we can assume safely that they would not wish to take advantage of the situation that has now arisen. Any attempt to clarify the situation at this stage might only lead to contentious argument. It would be preferable to let the matter rest for the time being. Mr. Banham has already acknowledged Mr. Kaye's letter non committally so far as our interests are concerned."
Mr Cross gave evidence before me. He recognised, of course, that over such a period of years it was extremely difficult to remember events and that he had to rely on the documents. He expressed the view that the pneumoconiosis exclusion was intended to embrace all conditions that arose from exposure to asbestos. He was sure that at the time the policy had been entered into he had been quite unaware of any distinction between one asbestos related condition and another. He recognised the pneumoconiosis exclusion as having been standard from 1948, but thought that all underwriters, ignorant of medical subtleties, had used "pneumoconiosis" as an all embracing term. It was not until the DAC/Smither correspondence of August 1969 that he had been asked to consider whether a distinction could be drawn between pneumoconiosis and other asbestos related conditions. In his witness statement he put the matter in this way:
"...as I had no doubt that Cape, the Brokers and Iron Trades all understood that the risk related to asbestos exposure was excluded, I saw no reason to change the arrangements...
"My firm belief and understanding was that we did not need to change the wording of the Policy because Cape wanted to have control of the asbestos claims from its work force, as they dealt with them in a "discreet" manner...We were not told of the number of asbestos claims, if proceedings were issued or what was paid. Cape kept all of this very much to itself. There was no question, but that Cape had met all its liabilities for asbestos related claims from its own funds and Iron Trades were not to be concerned or involved."
In his oral evidence Mr Cross was cross-examined on the phrase in Mr Knight's Note to the effect that any attempt to clarify the situation "might only lead to contentious argument". Mr Cross said that he could not contemplate contention between the plaintiffs and defendants, since the former were not only insureds but also members of a mutual company. (He also said, however, that if the plaintiffs had wanted cover for mesothelioma, the defendants would have wanted more premium.) What that part of the Note indicated, he thought, was internal contention within the plaintiffs themselves, perhaps as their plan for quiet handling of asbestos related claims came under pressure. To my mind, however, Mr Cross is mistaken about this. The Note clearly visualised that if the question of whether the policy covered or excluded mesothelioma had been raised, it would have been likely to have given rise to an issue between the parties. That is evident from the context of the Note. Internal claims handling was not in itself inconsistent with liability in the defendants, although it would have to be a matter of agreement and consent. As the Note commented: "It would be preferable to let the matter rest for the time being", ie to adopt a wait and see approach. Perhaps the plaintiffs would not take the point. Perhaps the point was not there to be taken. Perhaps the future incidence of mesothelioma was not going to be a matter of moment, perhaps the plaintiffs would at any rate be willing to swallow it for the sake of their commitment to internal handling of claims.
Mesothelioma claims during the 1966/1971 period
It is necessary to consider to what extent the plaintiffs received mesothelioma claims during the 1966/1971 period. It is common ground that the plaintiffs did not disclose any mesothelioma claims to the defendants during this period. The defendants relied on this fact for two separate arguments. The first went to support their submission on construction and estoppel by convention or acquiescence, and was to the effect that the plaintiffs' conduct in failing both to pass on such claims to the defendants under the policy or to disclose such claims for the purpose of annual renewals demonstrated what the defendants would submit was the correct understanding, namely that mesothelioma was within the exclusion. The second argument went to support their alternative submission that, if the plaintiffs were right after all to say that mesothelioma was covered by the policy because not excluded by the pneumoconiosis exception, then the plaintiffs had failed to disclose mesothelioma claims for the purpose of annual renewals, which therefore entitled the defendants to avoid the policy.
Mr Howard Palmer, who appeared for the defendants, accepted that for the purpose of non-disclosure the critical period was in practice the 1970/1971 renewals. Prior to 1969 there were no mesothelioma claims against the plaintiffs ultimately relied on by the defendants, and, come the 1972 policy year renewal, mesothelioma was expressly incorporated within the pneumoconiosis indemnity provided to the defendants. Even though the complete cover given by the defendants as secured by the cross-indemnity provided by the plaintiffs left the defendants with a risk on the plaintiffs' solvency, Mr Palmer did not seek to argue that such cover continued to impose an obligation of disclosure (regarding mesothelioma or other asbestos related disease) on the plaintiffs.
The plaintiffs were able for the purpose of these proceedings to recall from their database all mesothelioma claims received by them. This database was constructed relatively recently, in 1993/94. It records ten such claims made during 1968 through 1971. The first such claim, in the name of Ford, was notified in October 1968. There were three further claims made in 1969, in the names of Sibbons, Moon and Killyleagh, and the rest were made in 1971. One of the 1971 claims, in the name of Dalgleish or Dalgliesh, was originally raised in 1969, but not as a claim rather as a request for assistance.
The Ford claim was made on 18 October 1968 and settled on 28 November 1969. However, the solicitors' letter of claim, dated 18 October 1968, stated that Mr Ford died "as a result of contracting asbestosis", and no mention was made of mesothelioma. Mr Ford worked for the plaintiffs from 1937 to 1942 and again from 1946 to 1957, so that he had not worked for the plaintiffs during the period of the policy, and nothing can therefore be deduced from the plaintiffs' failure to seek to charge this claim to the defendants. Apart from the fact that mesothelioma is mentioned in the plaintiffs' database as the diagnosis, there is no contemporary material to support that diagnosis as distinct from a diagnosis of asbestosis.
The Dalgleish claim was first mentioned on 5 February 1969 in a solicitors' letter which speaks of "cancer stemming from asbestosis". The letter did not claim damages, but asked for the plaintiffs' assistance. It is not mentioned in their database as arising at that time. Mr Dalgleish worked for the plaintiffs from 1956 to September 1967, so that, in the light of the latency period, the relevant exposure could not in any event have occurred during the period of the policy. After several years during which the plaintiffs made ex gratia payments to Mr Dalgleish's widow, a claim was raised on her behalf by different solicitors in a letter dated 29 October 1971. That letter merely referred to "asbestosis". The claim was settled in December 1972 for £10,000. The plaintiffs' database refers to the claim as arising in October 1971 and to the cause of death as mesothelioma caused by asbestosis, from which it may be inferred that at some time the plaintiffs were furnished with a post mortem result in those terms.
The Sibbons claim was raised by solicitors' letter dated 21 March 1969, which simply referred to a disease caused by inhalation of asbestos dust. However, a writ was issued on 25 March 1969 which alleged "asbestosis leading to mesothelioma of the pleura". The writ was issued against six different defendants, of which the plaintiffs were the second. The first defendant was Darlington Insulation Company Limited ("Darlington"), of which Iron Trades, the defendants here, were also the insurers. So the defendants knew about this claim, including the fact that it had also been brought against the plaintiffs. Mr Sibbons worked for the plaintiffs only for about two weeks in 1955 and for two months in 1960. The database records a settlement figure of £493.45, and a diagnosis of mesothelioma caused by asbestosis. The claim would not have fallen within the policy period.
The Moon claim was raised by solicitors' letter dated 16 May 1969, and referred to "mesothelioma asbestosis". Mr Moon worked for the defendants for four months in 1930. The claim therefore did not fall within the policy period. The post mortem report, which comes within the disclosed papers, ascribes death to peritoneal mesothelioma, caused by pulmonary asbestosis. The lung tissue was found fibrosed. The claim was settled for £3,200, and is recorded on the plaintiffs' database as simply one of mesothelioma. It is not clear why the database does not refer to cause of death as mesothelioma caused by asbestosis.
The Killyleagh claim was raised on 6 November 1969 and settled on 18 December 1972, for £4,367. Mr Killyleagh was employed by the plaintiffs from 1943 to 1961. Thus this claim does not fall within the policy period. Nothing further is known about this claim other than that the diagnosis, as recorded in the database, was of death by mesothelioma caused by asbestosis.
There were no mesothelioma claims in 1970. The balance of the claims during this period were raised in 1971. There were five of them. Three of these five involved employees who had ceased working for the plaintiffs before the commencement of the policy period. The only claims involving any employment during the policy period were those concerning Mr Horgan, who worked for the plaintiffs from 1946 to October 1966, and Mr Bolton, who worked for the plaintiffs from 1949 to May 1969. Here again, however, the relevant exposure must have occurred prior to 1966. The diagnosis in both cases was mesothelioma caused by asbestosis.
As for the question of the long latency period and the effect on the relevant exposure period, I was told in evidence that in 1994 ten major insurers had agreed to share liability in ratio to the respective length of periods of employment of employees who had worked for more than one asbestos employer/insured, and that for these purposes the ten years previous to the diagnosis of mesothelioma were excluded. This agreement had been a pragmatic compromise to overcome previous disagreement about how to reflect the latency period in sharing liability in the case of employees who had worked for more than one insured.
In summary, therefore, none of these ten claims could have been charged to the defendants. Seven of them involved employment which fell completely outside the policy period. Three of them involved employment within the policy period, but of only 21 months (Dalgleish), 10 months (Horgan) and 41 months (Bolton). In each of those three cases death occurred within a relatively short time of the cessation of employment (the longest gap was four and a half years in the case of Mr Horgan). Given the latency period for mesothelioma of at least 10/15 years, none of these three cases could properly have led to a claim under the policy. As for non-disclosure, only five claims are relevant, the Ford, Dalgleish, Sibbons, Moon and Killyleagh claims. But of these, the Dalgleish claim was not recognised as involving mesothelioma until 1971, which is too late for the purpose of non-disclosure; the Ford claim was originally put as a matter of asbestosis[1]; and in the case of the Sibbons, Moon and Killyleagh claims, death was ascribed to mesothelioma caused by asbestosis[2]. While modern medical thinking would, as I understand it, prefer to say that both asbestosis and mesothelioma were independently caused by asbestos exposure, it is not clear that this was the understanding of the time. If asbestosis was accepted as the cause, or reasonably believed to be the cause, of the mesothelioma, then I do not think that a case of non-disclosure could be made good against the plaintiffs. I shall return to these matters below, when I deal specifically with the defendants' case of non-disclosure.
The 1972 amendments
In the light of the 1969 Act and its coming into effect on 1 January 1972, on 10 November 1971 the parties met for a discussion of the proposal that they should insure the Group's asbestos risk (as Mr Banham wrote in an internal memorandum headed "Asbestos Risk" dated 17 November 1971). In the course of the meetings, the plaintiffs handed over a schedule headed "Industrial Disease Claims(£)". It set out by year the names of claims and the plaintiffs' liability in respect of them in "damages" and "costs". Only three names on the list are familiar, the names of Ford and Moon (under 1969) and Sibbons (under 1971). It will be recalled that the Ford claim was made in 1968 as one of asbestosis and settled in 1969 (according to the plaintiffs' 1993/94 database) as one of mesothelioma. It must therefore be regarded for the purposes of the schedule as a mesothelioma case, or at least a mesothelioma due to asbestosis case. Similarly, the Moon case was raised and settled in 1969: raised as a case of "mesothelioma asbestosis" and recorded in the database as a case of mesothelioma. It too must therefore be regarded as at least a mesothelioma due to asbestosis case. The claim of Sibbons was raised in 1969 and settled in 1971 as a case of mesothelioma caused by asbestosis. There is no reference to the other seven claims mentioned above, presumably because although they were all raised prior to 10 November 1971 (Killyleagh in 1969 and the others in 1971 itself), none of them were settled before 1972. It was made clear at the meeting that costs had been allocated to the year of settlement, not intimation of claim, that estimates for outstanding liability were looked at as a bulk figure, and that claims since about mid 1971 had not been listed or estimated.
Mr Palmer relied on this schedule as indicating that mesothelioma cases were included under the "asbestosis" risk in the 1971 discussions between the parties. For the present, I would observe, first, that it is not possible to say that the Ford, Moon and Sibbons cases were not treated as asbestosis cases proper, since in each case the claim referred to asbestosis as either the only cause, or as the cause of mesothelioma; secondly, that in any event what was being considered at the meeting was for the defendants to undertake all asbestosis related risk for the purpose of the 1969 Act, at the stage without the cross-indemnity; thirdly, the reference to "asbestosis" in Mr Banham's memorandum is his language, but not necessarily the language of the plaintiffs; and fourthly, that the express reference to mesothelioma in memorandum 3 (as it subsequently emerged) indicated that the defendants (who drafted that memorandum) had the distinction between pneumoconiosis and mesothelioma in mind as well as the fact that liability under the compulsory insurance being contemplated would include liability for mesothelioma.
I have already described the reason for and the essential nature of the amendments to the policy engendered by the 1969 Act. It will be recalled that the pneumoconiosis exclusion was deleted and the defendants took a cross-indemnity from the plaintiffs, recorded in a memorandum (memorandum 3), in respect of all sums paid under the policy to the satisfaction of claims arising from "pneumoconiosis, mesothelioma and cancer of the lungs associated with pneumoconiosis". These amendments were further discussed in a letter dated 11 July 1972 in which clause 3 said that notwithstanding memorandum 3, it was the plaintiffs who would be responsible for payment of all amounts due in respect of claims "arising from pneumoconiosis" under the policy; and clause 5 said that save in the case of Small & Parkes nothing in the policy or the letter extended the defendants' liability for pneumoconiosis sustained and arising out of employment prior to 31 December 1971. I have already commented that the term "pneumoconiosis" in that letter was clearly intended to have the extended meaning of "pneumoconiosis, mesothelioma and cancer of the lungs associated with pneumoconiosis" found in memorandum 3.
This letter set out what was described in the correspondence between the parties and Muir Beddall as the "fronting arrangement", whereby the defendants fronted as the insurers of the plaintiffs' "pneumoconiosis" risk against payment of a special premium of £10,000, but the real risk was referred back to the plaintiffs by means of the cross-indemnity agreed in memorandum 3. The letter, together with memorandum 3, was the subject of drafting negotiations which began with a draft of both letter and memorandum forwarded by the defendants to Muir Beddall and sent on by the latter to the plaintiffs under cover of a letter dated 28 February 1972.
It would seem from Muir Beddall's covering letter of 28 February 1972 that there had been a recent meeting between the parties and Muir Beddall to discuss the fronting arrangement, and that the drafts forwarded under cover of that letter had emerged from that meeting. Previously, on 3 February 1972 the plaintiffs had written to Muir Beddall following a separate meeting with them to say that
"I note that you will be contacting us again in due course to finalise the practical details with the Iron Trades for the operation of the fronting arrangement for pneumoconiosis claims and that it is now proposed that there should be a separate fronting contract."
This letter of 3 February was sent only 6 days after 28 January. The significance of this is that there is a dispute whether a separate letter containing the parties' fronting arrangement, dated 28 January 1972, addressed by the defendants to the plaintiffs, was ever in fact sent to the plaintiffs.
The letter of 28 January 1972
This letter was relied on by the defendants in their points of defence as containing the agreement between the parties relating to the "pneumoconiosis" risk as from 1 January 1972. In their points of reply the plaintiffs had admitted the sending of the defendants' letter, but denied that that letter, as distinct from the later letter of 11 July 1972, had contained the parties' new agreement regarding the fronting arrangement.
On further consideration, however, the plaintiffs asked leave to withdraw that admission regarding the sending of the letter of 28 January, and leave was granted. This was because it appeared that although what seems to be a top copy of that letter, on the defendants' letterhead, had indeed emerged on discovery in the defendants' files, it did not appear on the plaintiffs' files. Its absence from the plaintiffs' files in itself may not be critical, because over the decades letters have gone missing, but its significance is increased by the fact that the letter in the defendants' files has pencil markings on it which would seem to indicate that it was still a draft. Moreover, there is no sign that it was acknowledged by the plaintiffs, and a copy does not appear in Muir Beddall's files either. Perhaps most important, however, is the fact that it is difficult to fit it into the overall context of the correspondence leading up to and including the letter of 11 July 1972. Indeed, it is difficult to see how the two letters can lie down together, for they cover the same ground. In this connection, it is also significant that whereas the letter of 11 July and memorandum 3 were negotiated in drafts passing backwards and forwards between the parties, the letter of 28 January comes out of the blue. Moreover, if the letter of 28 January had contained the parties' fronting arrangement, it is difficult to see how the plaintiffs' letter to Muir Beddall dated 3 February could have looked forward to the finalisation of the practical details for the operation of the fronting arrangement or could have omitted reference to the letter of 28 January, or how Muir Beddall's letter of 28 February could have failed to point out that the defendants' enclosed drafts were in substitution for the letter of 28 January.
I conclude therefore that the letter of 28 January was never agreed and never sent. I will nevertheless deal below with the question of construction which on the defendants' case arises on its wording.
The BBA policy and mesothelioma claims in 1973
I have already mentioned that another asbestos manufacturer insured by the defendants was BBA. On 22 January 1973 the defendants wrote an internal memorandum concerning the BBA employers' liability policy in which they discussed asbestosis and mesothelioma. They wrote:
"...Asbestosis whilst a serious problem, Mesothelioma is a more difficult matter to deal with since the condition is dormant for more than 20 years and the cause of the cancer only is established by the Pathologist after death.
"These claims are becoming more prevalent..."
The memorandum went on to refer to two BBA mesothelioma cases.
The Eagle Star litigation in 1981/1984
Eagle Star, it will be recalled, was the plaintiffs' employers' liability insurer down to and including 1965. The relevant policies went back so far, ultimately it was thought to 1913, that their wording had been lost, but it was common ground that they excluded cover for pneumoconiosis. On 5 June 1981 the plaintiffs wrote to Eagle Star to say that such exclusion did not prevent recovery in cases of lung cancer or mesothelioma due to exposure to asbestos dust. A schedule of current claims against the plaintiffs was enclosed and Eagle Star was notified of the plaintiffs' claim for cover for them. Eagle Star was also notified that the plaintiffs were claiming in respect of "all past cases settled by Cape" of a like kind. The enclosed schedule was of some 25 names. The earliest death recorded on the schedule was 22 April 1958, a case of lung cancer, but there was no other death earlier than 27 January 1977, a mesothelioma case. I do not know whether the former case is correctly or mistakenly dated, but in any event I would infer that the claim in respect of that death did not come forward to the plaintiffs much if any earlier than the other cases on the schedule. It is interesting to note that the start of the employment periods of the deceased employees concerned went back into the 1950s or earlier, in many cases into the 1930s. Only in a few cases did the employment periods continue into the 1960s, and in only one case of mesothelioma did the employment period fall within the period of the defendants' 1966/1971 policy - the case of Mr Burns, who worked for the plaintiffs between 1967 and 1977. The presence of this case on the plaintiffs' schedule as an item of claim against Eagle Star would appear to have been an error.
It would seem from this letter to Eagle Star that the plaintiffs had not previously claimed on their Eagle Star policy in respect of their liability to mesothelioma claimants.
On 28 July 1982 the plaintiffs issued a writ against Eagle Star in respect of three mesothelioma cases, Mr Gray, Mrs Jefferson and Mrs Young, who had worked for the plaintiffs in 1962, in 1951, and from 1939 to 1941 respectively.
On 5 October 1982 the question was asked internally at the defendants whether the exclusion in the plaintiffs' policy "would or would not embrace claims arising from the contraction of Mesothelioma". A manuscript response written by Mr John Robinson, the assistant general manager, reads:
"No further action required now, but note "Midland" have denied that "PN cover" under their policy (or whatever) included Mesothelioma. Our position, if raised, is insecure but we would make the same contention initially".
Mr Robinson had succeeded Mr Banham as assistant general manager, and had previously worked closely with him. Mr Robinson's reference to the defendants' position as being insecure is significant in that Mr Robinson's name or initials are to be found on several of the defendants' documents at the time when the policy was first being negotiated in 1966. It is not clear why this query was raised at that time, but it may have had something to do with the fact, as it would seem, that other insurers, such as Midland and Eagle Star, were beginning to face up to the same point.
Be that as it may, by letter dated 5 June 1984 Eagle Star wrote directly to Mr Robinson as follows:
"For your very private information we are at present engaged in some litigation seeking to test the validity of the Asbestosis Exclusion which appeared in our policies and which in general terms followed the old tariff wording. It is being suggested that the word asbestosis is no longer appropriate to cater for all asbestos related diseases whereas we are all aware that at the time that the wording was devised this was a generic term used to cover all asbestos related disease."
The defendants' assistance was requested for obtaining any evidence to support Eagle Star's contention and to meet the suggestion being made to the contrary.
On 1 October 1984 Eagle Star wrote again to Mr Robinson, referring directly to the plaintiffs and saying:
"You will be aware from our previous conversations that we are involved in some litigation concerning the above named company, our last policy having lapsed in 1965.
"The point at issue is the interpretation of the Asbestosis Endorsement on the policy which followed the old tariff wording which was agreed between the tariff, non-tariff, and mutual offices back in 1948. For ease of reference a copy is enclosed.
"The point being made now by the Cape is that the endorsement as worded is not appropriate to exclude mesothelioma and certain of the other asbestos-related diseases. We are quite satisfied that the evidence of conduct by way of documentation which we have is strong but we are asked by Counsel whether it is possible for us to ascertain the wordings which were used by other companies, notably your goodselves, and in particular prior to 1965. It would also be very helpful if you could let me know whether your form of wording changed subsequent to 1965 or whether in fact you still use a wording which excludes asbestos alone or whether you do refer to asbestos-related diseases. For ourselves I think I am right in saying that we have no policies now which would exclude asbestosis at all since the inception of the Compulsory Insurance Act.
"Any help which you can give me here would be greatly appreciated..."
This request led the defendants to consult their files, and inter alia the documentation of August 1969 to which I have referred above was disinterred. A Note for file dated 10 October 1984 included this paragraph:
"Mesothelioma became a prescribed disease round about 1967 in its own right. Obviously before then one could argue that it was included as part of asbestosis or pneumoconiosis. Subsequently the question arises as to whether we should have taken some action in relation to our wording."
Hand-written notes which may have been part of the same investigative exercise state:
"If [Eagle Star] win it may prevent Cape from attempting to push such claims on to us.
"Mr Cross may feel strongly enough about his involvement to argue insured have always sought to exclude all conds [conditions] arising from asbestos."
The investigator may have been a Mr Charles Young, for in a further letter dated 24 October 1984 Eagle Star thanked Mr Robinson for a telephone call from Mr Young, and continued in a vein which suggested that the information that he had provided was useful. Thus -
"May I ask therefore if you would be kind enough to let us have copies of any of these helpful documents and should it be necessary whether you or one of your colleagues might be prepared to give evidence on our behalf.
"As you know we are all agreed that it is in the interests of the market as a whole that if the case goes to Trial then it is one which could have an impact upon the whole of the market."
However Mr Robinson wrote back on 12 November 1984 to express a much more cautious note. He said:
"Enclosed are copies of documents which have some bearing on the requirements of the Insured in relation to diseases arising from the use of asbestos. The most relevant and indeed crucial is that dated the 20th August 1969. It is a note for the file prepared by Mr F Knight then our Accident Manager. Unfortunately some of the documents could be dangerous.
"I hope you will derive some benefit from the enclosures which are passed to you for information and I note from the final paragraph of your latter dated 1st October 1984 that none of them will be used or produced without your first making a prior and proper official request..."
In the end, the defendants did not give evidence for Eagle Star and the Eagle Star litigation with the plaintiffs was shortly thereafter compromised, as Eagle Star informed Mr Robinson on 21 November 1984. The settlement agreement itself was dated 26 November 1984, and in essence provided that for a payment of £550,000 by Eagle Star to the plaintiffs, the latter's existing claims were withdrawn and for the future the plaintiffs acknowledged an issue as to the scope of their policies with the Eagle Star and agreed to release and discharge Eagle Star from any claim arising out of any disease attributable to asbestos. That release did not apply however to any Cape policies in which it was evident that there was no asbestos exclusion.
The plaintiffs' mesothelioma claims against the defendants, and their payment.
The plaintiffs' first mesothelioma claim against the defendants was notified to them on 14 May 1985 and concerned the case of Mr Roberts, who had worked for the plaintiffs between 1965 and 1968. For some reason that claim went to sleep for a number of years, but in 1989 it was followed up. The defendants rejected it on the ground of the pneumoconiosis exclusion. On 26 April 1990 Mr Oscar Tempest, who was manager of the defendants' technical claims unit, researched a memorandum for Mr Ian Helmore, the defendants' senior liability underwriter. Mr Tempest said he sympathised with the plaintiffs' argument, and wrote -
"...as we are using medical terms then these would be given their strict medical meaning irrespective of the common usage which may be applied to them. It is our view that mesothelioma is not a pneumoconiosis. The latter refers to a chronic form of inflammation of the lungs and has been defined as "permanent alteration of lung structure due to the inhalation of mineral dust and the tissue reactions of the lung to its presence excluding bronchitis and emphysema". The tissue reaction is of a fibrotic nature. On the other hand, mesothelioma is a cancer forming within the pleura, the covering of the lung or the peritoneum or pericardium. These conditions can, therefore, be identified as being of a completely separate nature and the generic term "pneumoconiosis" does not include mesothelioma. As asbestosis is a form of pneumoconiosis it is also not a synonym for mesothelioma.
"We have not doubt that at the time the policy was issued it was intended to exclude conditions attributable to asbestos exposure. However, at that time mesothelioma would not have been separately categorized and certainly not as attributable to asbestos exposure.
"The same arguments could also be used with regard to other malignancies which are now allegedly due to asbestos exposure such as cancers of the lung and larynx.
"In all the circumstances we would appreciate yours views as to whether you accept that in this particular case the exclusion does not apply and that we should pay our proportion of the claim on a time exposure basis."
Mr Helmore penned his reaction on the bottom of the memorandum. He said:
"I agree entirely with your view that whilst it almost certainly was not our intention to cover this type of claim there seems little prospect of success in arguing the point."
Mr Tempest gave evidence before me and said that these views expressed by him and Mr Helmore were given without the benefit of the contemporaneous underwriting files, which had been looked for but not found at that time. The views were nevertheless circulated to all members of the head office claims team, in accordance with standard practice.
Mr Tempest followed up by writing on 3 May 1990 to the local office from which the Roberts claim had come forward, in the following terms:
"It is accepted by I Helmore that, whilst it was not our intention to cover this type of claim, there is little prospect of success in arguing the point as the exclusion will clearly be strictly construed against us. In view of this we should now confirm indemnity for the period we were on risk and pay our proportion of the claim on a time exposure basis.
"The reason the exclusion was restricted to the conditions specified is that, at that time, they were the only ones as identified as attributable to asbestos exposure. It was not until later that mesothelioma became separately diagnosed and was shown to be attributable to asbestos exposure."
As a result the Roberts claim was accepted in May 1990, and paid on 19 September 1991.
The next mesothelioma claim to come forward arose out of the death of a Mr Watts, who had been employed by the plaintiffs for three months in 1966. That claim was notified to the defendants on 26 July 1991, accepted on 4 November 1991, and paid on an interim basis on 25 November 1991.
A further claim concerning a Mr Winn, who was suffering from asbestos induced pleural disease and chronic bronchitis was notified to the defendants on 30 August 1991. He had been employed by Universal during 1969. His case was accepted by the defendants in November 1991 as lying outside the pneumoconiosis exclusion.[3]
As further claims started to come in, however, the defendants began to reconsider their position. Towards the end of 1992 Mr Tempest came across the underwriting files relating to the change from 1971 to 1972 whereby the fronting arrangement was put in place. He had not had access to that file when previously considering the position of the width of the pneumoconiosis exclusion. An internal memorandum dated 22 January 1993 refers to this discovery:
"Spoke to Oscar Tempest...
"He advised that he has unearthed an underwriting file which indicates amongst other things that if we were in any event obliged to indemnify Cape for asbestos related diseases (presumably because of the Employers Liability Compulsory Insurance Act) they would then reimburse us accordingly.
"He is of the view that we have not given asbestos related disease cover..."
The logic of this memorandum, if I understand it correctly, would appear to be based on a confusion of the situation before and after the 1972 change. On the same day the defendants responded to a claim concerning Mr Pelham-Reid, who suffered from pleural thickening, by denying cover.
On 26 March 1993 the plaintiffs' solicitors wrote to the defendants concerning a claim arising out of the death by mesothelioma of a Mr Wilkinson. The defendants' reply dated 5 April 1993 was to deny cover for "asbestos exposure risk". Another mesothelioma claim arising out of the death of a Mr Brennan appears to have received a similar response on 27 April 1993. At this period there seems to have been some continued confusion as to whether or not there had been any change in the 1972 policy year. On 7 July 1993 a local office wrote to Mr Tempest in relation to a further mesothelioma claim: "We are simply stalling awaiting your decision."
Even so on 14 July 1993 the defendants made a payment in the Brennan claim. And on 24 August 1993 the defendants made a payment in another mesothelioma claim concerning a Mr Vosper, who had worked for the plaintiffs in 1966.
Then on 10 February 1994 Mr Tempest wrote a further memorandum regarding the policy, announcing a change of position:
"From our recent perusal of a number of old underwriting files we have formed the view that the intention between the Insured and ourselves was that all claims arising from asbestos exposure should be excluded. There are clear indications that we were asked to ignore the asbestos risk for the purposes of our quotations as the Insured were establishing their own fund to meet these claims. In view of this, irrespective of the fact that the strict interpretation of pneumoconiosis exclusion would not include mesothelioma, we have taken the view that our policy does not provide an indemnity in respect of such claims. This is disputed by the Insured who are reviewing their position.
"However, whilst these discussions are ongoing it is essential that no action is taken in relation to any individual claim which would be contrary to the stance we have adopted. In these circumstances please ensure that any outstanding claims, or new ones reported, from this Insured relating to asbestos exposure are handled such that our position has not been committed."
Mr Tempest said that the files which had led to this change of mind had only been discovered at the end of 1993. It is not clear to me that this is an accurate recollection, since the memorandum of 22 January 1993 already refers to his unearthing of at any rate one underwriting file. Mr Tempest may therefore have been mistaken somewhat as to the chronology, or it may be that that discovery led to the recapture of some further files. It is also not clear to me what it was in the old files that led to the defendants' change of position: for instance, it seems to me that the reference in Mr Tempest's memorandum to the plaintiffs establishing their own fund properly relates to the 1972 negotiations. Thus in Mr Banham's memorandum of 17 November 1971 he had written that "Cape have had no special fund to meet the risk in the past". With great candour, Mr Tempest agreed in cross-examination that it was not on his instructions that the defendants contended that mesothelioma was within the pneumoconiosis exclusion.
At any rate it is that change of position in February 1994 that ultimately led in July 1995 to the plaintiffs' issue of their originating summons in this litigation.
The relief claimed and the issues debated
The plaintiffs claim a declaration that on the true construction of the 1966 policy's pneumoconiosis exclusion the defendants are not entitled to refuse to indemnify the plaintiffs against their liability for claims against them in respect of pain, injury, loss and damage suffered by reason of the claimant developing mesothelioma.
The relief claimed has led to the following issues:
(1) Construction: Whether as a matter of construction the pneumoconiosis exclusion excluded claims for mesothelioma.
(2) Rectification: Whether the pneumoconiosis exclusion should be rectified so as to embrace an exclusion for all claims arising out of asbestos related disease and therefore mesothelioma as well.
(3) Laches: Whether in any event the defendants are prevented by laches from obtaining relief by way of rectification.
(4) Estoppel: Whether there was an assumption shared by both parties to the effect that all claims arising out of asbestos related disease were excluded, amounting to an estoppel by convention or acquiescence preventing the plaintiffs from obtaining the declaration they seek.
(5) The letter of 28 January 1972: Whether the defendants' letter dated 28 January 1972 evidenced an agreement to the effect that the defendants were to have no liability thereafter for claims arising from any asbestos related disease.
(6) Non-disclosure: Whether the plaintiffs failed to disclose the incidence of mesothelioma at the time of the 1970 and 1971 policy year renewals, thereby entitling the defendants to avoid the policy from 1970.
(7) Affirmation and waiver: Whether the defendants in any event affirmed the policy and waived any material non-disclosure by payment of claims in 1990/1993.
There was at one time a further issue raised by the defendants' plea that it was the custom and usage of the liability insurance market in 1966 to give the pneumoconiosis exclusion a meaning whereby all claims for asbestos related disease were embraced within that exclusion. That further issue was, however, abandoned at the commencement of trial.
The non-disclosure issue was at one time expressed more widely than has been described above, but in the course of trial it was narrowed to that stated.
Issue 1: Construction
It will be recalled that the pneumoconiosis exclusion was in the following terms:
"claims arising from Pneumoconiosis or Pneumoconiosis accompanied by tuberculosis".
On behalf of the plaintiffs, Mr Colin Edelman QC relied on the medical and statutory definitions of pneumoconiosis, on the fact that the wording of the pneumoconiosis exclusion appears to have derived from the statutory wording itself at the time of the exclusion's introduction pursuant to the 1946 Act, and to the fact that it is at any rate now accepted on all sides, and is common ground in this litigation, that pneumoconiosis or, in its asbestos related form, asbestosis, is different from mesothelioma. As Mr Palmer wrote in his skeleton argument:
"It is accepted by Dr Davies [Dr Dewi Davies, the defendants' expert] that mesothelioma and other conditions caused by inhalation of asbestos do not fall strictly within the accurate medical definition of pneumoconiosis, because they do not involve a fibrosis of the lung parenchyma. On this basis the history of asbestos shows that it caused a number of conditions as well as asbestosis (a diffuse lung fibrosis), namely lung cancer, mesothelioma (of the pleura or peritoneum), pleural plaques, pleural effusion and diffuse pleural thickening."
Mr Palmer, nevertheless, submitted that the parties did not intend to use the word pneumoconiosis in its strict medical meaning, but as a catch-all term meaning any condition resulting from the inhalation of dust, including asbestos dust. The pleaded meaning is found in paragraph 7 of the points of defence:
"(1) on the true construction of the said clause all claims arising out of inhalation of or exposure to asbestos dust were excluded; further or alternatively
"(2) the term Pneumoconiosis in the context of the policy was intended by the parties to it to include all disease or injury arising out of the inhalation or exposure to asbestos dust, and therefore bore such meaning in the policy."
In Mr Palmer's skeleton argument the point of construction was put in this way:
"The parties were not medical men, but commercial men who included the term Pneumoconiosis, certainly to include asbestosis and to express their intention to exclude, by that term, liabilities for occupational disease of workers arising out of the inhalation of dusts, in particular asbestos dust."
In this connection Mr Palmer relied on the matrix of the policy, as to which I refer to his submissions below, and to the following dicta regarding the process of construction. In The Tropwind [1982] 1 Lloyd's Rep 232 at 236 Lord Denning MR said:
"...the correct meaning of words is to be found - not by their derivation or by literal analysis - but by the meaning commonly attached to them by the users of them."
In Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR at 912/913 Lord Hoffmann restated his views as to principles of construction and the importance of a contract's matrix. Thus at 912H/913A he said:
"Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next [the previous negotiations of the parties and their declarations of subjective intent], [the matrix] includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man."
And at 913B/C he stated:
"The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean."
Mr Palmer therefore submitted that the parties had used the term pneumoconiosis, and would reasonably have understood each other as so doing, as a convenient shorthand to embrace medical conditions which, as subsequent understanding has shown, went beyond pneumoconiosis itself, and as a term which at the time of contracting was used in the broader sense relied upon, in part because of their comparative ignorance at that time of the aetiology of various asbestos related conditions. Thus as to the policy's matrix at the time of its agreement in early 1966, Mr Palmer emphasised the following matters:
(1) The plaintiffs were asbestos manufacturers: in excluding pneumoconiosis, it was asbestos related disease which was uppermost in the minds of both parties, without seeking to distinguish between types of such disease.
(2) Thus the pneumoconiosis exclusion was understood as being concerned primarily with the risk of "asbestosis", where asbestosis was used as a general word for all asbestos related disease, rather than, strictly, as a type of pneumoconiosis or fibrosis of the lungs.
(3) This was at least in part because it was in any event the understanding at that time that "asbestosis" was the cause of other asbestos related conditions such as mesothelioma, rather than that each of them was a separate disease with a common aetiology in asbestos.
What was the evidence that Mr Palmer relied on for his submission that these were matters which were so, and thus were known or to be presumed to be known or at least reasonably available to be known by each of the parties?
There was the fact that the exception whereby Small & Parkes were to be outside the pneumoconiosis exclusion was referred to in correspondence or forms as being because that subsidiary was to be covered, as it had been under its existing insurance, for "Asbestos Risk" or "the risk of Asbestosis" (see for instance the Small & Parkes questionnaire sent to Muir Beddall under cover of the plaintiffs' letter dated 3 September 1965). Sometimes the pneumoconiosis risk was referred to as "The asbestosis and pneumoconiosis risk", as in Muir Beddall's letter to the defendants dated 26 October 1965, or the defendants' memorandum of 16 November 1965. In Muir Beddall's letter to the plaintiffs dated 17 November 1965 the pneumoconiosis exclusion was referred to as "the exclusion of lung claims (asbestosis and pneumoconiosis)". The defendants' quotation dated 18 November 1965 stated "Asbestosis and pneumoconiosis included in respect of Small & Parkes Limited only". The defendants' proposal forms asked for information regarding claims for "Silicosis, Asbestosis or Pneumoconiosis". The defendants' memorandum dated 3 February 1966 stated - "Apart from the firm of Small & Parkes Limited, pneumoconiosis and asbestosis is not covered." So it may be said that pneumoconiosis and asbestosis were used as almost interchangeable terms, or at any rate that the form of pneumoconiosis with which the parties were particularly concerned was asbestosis. The next step of the argument was to seek to ally risk of asbestosis with the risk of asbestos, but that it seems to me is more difficult, despite the use of some loose language.
Mr Palmer next relied on the affidavit evidence of Dr Davies to the effect that pneumoconiosis came to be used by many people for almost any kind of occupational lung disorder caused by dust; that during the 1950s and early 1960s, as it became clear that exposure to asbestos dust caused not only the diffuse lung fibrosis known as asbestosis but also other conditions thought to be associated with asbestosis, such as lung cancer, pleural disease and mesothelioma, so all these conditions were often swept up within the asbestosis label; that as late as 1975, Respiratory Diseases by Crofton and Douglas referred (Table 30.1 at page 509) to Asbestosis under the table heading of "Commoner Pneumoconioses" and stated the "Pathological effects" of asbestosis as including mesothelioma, viz -
"Pulmonary fibrosis, pleural calcification, bronchial carcinoma, pleural and peritoneal mesothelioma, skin warts";
that as late as 1973 the Industrial Injuries Advisory Council's report (at para 48) stated that, whereas asbestosis was originally interpreted generally as meaning diffuse pulmonary fibrosis -
"in recent years there has in addition been a tendency to describe as asbestosis such changes as pleural thickening and pleural plaques";
that in 1980 the sixth edition of The Diseases of Occupation by Hunter was still discussing lung cancer and mesothelioma within the section "The Pneumoconioses"; and that in conclusion he would have no hesitation in saying that in the far less well informed and evolving industrial climate of the 1960s the expression "pneumoconiosis" was in general use as an all embracing term to cover industrial diseases from the inhalation of dust and was not confined to the strict medical definition to which some, but not all, doctors adhered.
In this connection Mr Palmer also relied on the definition of pneumoconiosis in the 1973 Addenda to the Shorter Oxford English Dictionary (3rd Edition, 1944) as
"any condition of the lungs that results from inhalation of dust, esp chronic fibrosis as an occupational disease of coal miners or other workers";
as well on the absence of any disclosure by the plaintiffs of their mesothelioma cases, or of any attempt to enforce mesothelioma claims under either their Eagle Star or their Iron Trades policies until the early 1980s, as consistent with and reinforcing his submission on construction.
On the other hand, Dr Rudd, the plaintiffs' expert, while accepting that the term asbestosis may have been misused on occasions, took issue with Dr Davies on his affidavit's more general or sweeping conclusions. He pointed out that whatever uncertainty there may have been at some stage about how to describe benign pleural disease, there had never been the same degree of confusion over mesothelioma which had become a prescribed disease already in 1966 for the very reason that it was found independently of asbestosis. The position regarding diffuse pleural thickening was different, however. In 1973, when the Industrial Injuries Advisory Council produced their report, they suggested that the definition of pneumoconiosis should be widened to include pleural thickening and pleural plaques, but their suggestion was not adopted.
In cross-examination, it seemed to me that Dr Davies withdrew from his wider case. He accepted that, medically speaking, there was no question of mesothelioma being a pneumoconiosis, and that they were totally different medical conditions. He expressed his personal opinion that the term pneumoconiosis should be confined to fibrosis due to mineral dust. He accepted that although other doctors described pleural plaques and pleural thickening as asbestosis, there was no similar medical confusion over the distinction between asbestosis and mesothelioma - although there may have been greater imprecision outside medical circles. Indeed, he had annexed to his affidavit a letter that he had written to the Lancet in 1977 calling for agreement on a definition of asbestosis as being fibrosis of the lungs caused by asbestos dust.
In my judgment, there may have been some uncertainty in wider medical circles as late as 1966, or even later, as to whether mesothelioma was itself caused by asbestosis, and also some imprecise use of language regarding the term asbestosis, particularly among the wider public. It is also likely that the parties to the policy never gave their direct or close attention to the question of exactly what the pneumoconiosis exclusion would embrace, and in particular whether it would or would not embrace mesothelioma. The fact is, as it seems to me, the pneumoconiosis exclusion was the well known tariff wording which had been in use for many years as an exclusion concerned, loosely speaking, with the risk of inhalation of dust such as asbestos, and that was why it was incorporated into the Iron Trades policy, as it had been incorporated into the previous Eagle Star policy (with the exception of Small & Parkes). If one asks why that wording was used in this case, it was because it was the standard tariff wording. What it embraced, however, was simply not a matter of precise understanding, other than in terms of medical and statutory definition. In those senses, medical and statutory, the meaning of pneumoconiosis was and is clear: it relates to fibrosis of the lungs, not to cancer of the pleura. As it happens, just at the time the policy was being put into effect, the distinction between asbestosis and mesothelioma was being recognised and acted upon in the medical and statutory context by the listing in 1966 of mesothelioma as a separate prescribed disease. This distinction was also a matter of public comment by October 1965 in a lay publication such as The Sunday Times with its wide circulation.
In these circumstances I think that the pneumoconiosis exclusion should be construed according to the medical and statutory definitions and not according to a wider or looser understanding of the term. I have in mind the following reasons. First, the terms are in themselves medical terms, and they reflect the language of the statutory regime for the protection of employees. Secondly, the pneumoconiosis exclusion itself developed historically and chronologically out of that regime. Thirdly, at the very time that the policy was under negotiation, the introduction of mesothelioma as a separate prescribed disease was under consideration, as the Sunday Times article made clear. Within the first year of the policy, mesothelioma became a separate prescribed disease. If the medical and statutory definitions of pneumoconiosis had parted company, then it may be that a further problem of construction would arise, but as it is, that has not happened.
I therefore asked Mr Palmer whether it was possible that a distinction should be made between the first and subsequent years of the policy. He answered by saying that in theory that was possible, but that his case was that the argument on construction was all or nothing: on the basis that what was agreed at the beginning was what the parties intended and that annual renewals thereafter (up to the major change in 1972) were merely administrative. The fact remains, however, that each year was a separate renewal, and it seems to me impossible to say, after mesothelioma became a separate prescribed disease, that pneumoconiosis embraced it. The statutory change could not have escaped the parties' notice. If therefore the parties were content to leave the pneumoconiosis exclusion unchanged, it can only be because it reflected, as I believe it did, what must be regarded as their original intention, which was to take pneumoconiosis as it was to be found in the medical and statutory scheme of things: if medical as confirmed by statutory definition properly included with pneumoconiosis and thus with asbestosis various conditions caused by inhalation of asbestos dust beyond fibrosis of the lungs, then the exclusion could similarly embrace such conditions, but if not, not.
Fourthly, if once the meaning of pneumoconiosis went beyond its medical and statutorily adopted definition, where could its meaning be found? There was no certainty beyond the medical definition: some doctors thought one thing, others another; some were better informed, others less so; some doctors were more precise in their terminology, others looser; and what laymen thought and how they expressed themselves was even more uncertain. And as time went by, the position was in flux.
Fifthly, the exclusion was not even expressed in terms of asbestosis, but pneumoconiosis. If, therefore, pneumoconiosis embraced all conditions due to the inhalation of asbestos dust, then pneumoconiosis ought to embrace all conditions due to the inhalation of any dust. That, however, would create still greater uncertainty.
Sixthly, I do not think that anything critical can be read into the fact that the plaintiffs' claim to be indemnified under their policies with the defendants or Eagle Star in respect of liability for cases of mesothelioma appears first to have arisen only in 1981. There was no case of a mesothelioma death on the plaintiffs' schedule sent to Eagle Star under cover of their letter of 5 June 1981 earlier than January 1977. The earlier claims against the plaintiffs in the 1966/1971 period in which mesothelioma was mentioned were cases in which death was also ascribed to asbestosis[4].On that basis I do not think that any of them were claims where the plaintiffs could have sought to make any recovery in the face of the pneumoconiosis exclusion. In any event I cannot be confident that I know the true state of facts vis a vis Eagle Star; and as for the defendants' policy, it would be in principle unlikely that a mesothelioma claim would surface for some 15 years or so after the inception of their policy. In this state of things, the fact, if it be the case, that the plaintiffs may have decided for a number of years to absorb a number of claims in respect of which they might have been able to recover an indemnity from their insurers even though death was ascribed to asbestosis (causing mesothelioma), which I doubt, when their liability was relatively small, and their claim to be indemnified was likely to be fought, and they had their own interest in seeking to keep as much of their claims handling to themselves, cannot in my judgment determine the true construction of the pneumoconiosis exclusion.
Finally, as for Lord Hoffmann's analysis in ICS v. West Bromwich, I do not think it can be readily applied to the present case. I would like to think that I have made all proper allowances for the relevance of the factual matrix and for the manner in which reasonable people would have understood the pneumoconiosis exclusion. Having said that, I do not think that the particular problem which Lord Hoffmann was addressing in that case is relevant here. There, as Lord Hoffmann remarked at 914E-G, their Lordships were dealing with "choosing between competing unnatural meanings" in circumstances where the parties "must have made mistakes of meaning or syntax". Mr Palmer, however, accepted that such considerations did not apply: there was nothing unnatural about the meaning sought to be applied to the pneumoconiosis exclusion by the plaintiffs, nor was there any mistake of meaning or syntax in its wording.
For all these reasons, I therefore hold that the pneumoconiosis exclusion does not embrace mesothelioma. The defendants' subsequent determination in the early 1990s that they had not succeeded in excluding liability for mesothelioma cannot assist the process of construction: but it brings me some comfort that what has seemed to me to be the better argument on construction also at one time seemed the better argument to the defendants themselves. Although they subsequently changed their minds, I do not really understand on what basis they did so. It was suggested by Mr Cross that one reason for the change of mind was the realisation that the defendants had wanted to keep all asbestos related claims handling within their own organisation. That may have turned out to be the case, but it remains the fact that when the policy was first negotiated, it was agreed that, despite the pneumoconiosis exclusion, the defendants would provide a claims handling service to the plaintiffs. It was only as time went by that the defendants realised that in practice the plaintiffs preferred to do everything or as much as possible in house.
Issue 2: Rectification
Mr Palmer submitted that even if the defendants failed on construction, they were entitled to rectification of the policy on the basis that the parties were ad idem in their intention to exclude all asbestos related disease. He referred to what Brightman J said in In re Butlin's Settlement [1976] Ch 251 at 260H, viz -
"Furthermore, rectification is available not only in a case where particular words have been added, omitted or wrongly written as a result of careless copying or the like. It is also available where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction. In such a case, which is the present case, the court will rectify..."
In my judgment, however, the defendants have not come anywhere near meeting the difficult burden of proving a case of rectification. I do not think that the parties did share a common intention that all asbestos related conditions were excluded. They were prepared to use a well known tariff wording, but I do not think they addressed their minds closely to exactly what that wording included or excluded. Mr Palmer submitted that the documents to some of which I have referred above leading up to the policy show that the risk of asbestosis and asbestos were used interchangeably, but I do not accept that he made good that submission. On the contrary, if anything, there was a tendency to equate pneumoconiosis and asbestosis, which does not assist the defendants' case.
Mr Palmer urged me to test the matter by reference to the incident in August 1969 when DAC brought to the defendants' attention Dr Smither's view that "mesothelioma is distinct from asbestosis" and their own opinion that "where you seek to exclude the risk of asbestosis, you should now also exclude mesothelioma as well". Mr Palmer relied on Mr Knight's memorandum of 20 August 1969 and the thought there expressed that the plaintiffs "would not wish to take advantage of the situation that has now arisen". However, the memorandum is at best double edged, and if anything counts against the defendants' contention, for Mr Knight immediately goes on to state that "Any attempt to clarify the situation at this stage might only lead to contentious argument", and that it would be better to let the matter rest. I doubt that it is acceptable to seek evidence of the parties' common intention in subsequent events, but in any event in my judgment Mr Knight's comment recognises that there was no settled intention at the time of contract: if there had been, the defendants would not have been hesitant about clarifying the point. Moreover, Mr Knight's language about "the situation that has now arisen" is, in my view, significant. What was it that had now arisen? It was the realisation that a condition, mesothelioma, which had perhaps at one time been erroneously thought of as caused by asbestosis or as being within that term, was not a symptom of asbestosis but something different.
Mr Palmer also relied on the 1972 fronting arrangement as being evidence for the parties' earlier common intention, on the basis that the parties merely sought to continue in 1972, through the medium of the cross-indemnity, what had previously been the subject matter of the pneumoconiosis exclusion. I am again doubtful at this attempt to use later material to prove the parties' intention at the time of contract. In any event, whereas the use of the single term "pneumoconiosis" in the letter of July 1972 would, if it had stood alone, have gone some way to support Mr Palmer's contention, when that letter is read along with memorandum 3 to which it refers, it is clear that the cross-indemnity sought to exclude from effective cover something further than pneumoconiosis, and that something further was mesothelioma. When, therefore, the parties gave new consideration to the terms of the cover, they realised that they had to shift liability for mesothelioma as well as pneumoconiosis from the shoulders of the defendants to those of the plaintiffs.
Mr Edelman sought to remind me of the stringent conditions which have to be met before a court will find a case of rectification made out, such as the need for "convincing proof" both that the document to be rectified was not in accordance with the parties' true intentions at the time of its execution and also that the document in its proposed rectified form does accord with their intentions: see CHITTY on CONTRACTS, 27th Edition, 1994, Vol I at para 5-045. I agree that the defendants here have not measured up to the standard of the burden that lies upon them. In my judgment this case lies closer to the point made in CHITTY at para 5-041 that -
"[Rectification] will also be refused if a written agreement fails to mention a matter because the parties simply overlooked it, having no intention on the point at all. In such a case the written agreement must be construed as it stands."
I therefore reject the defendants' case on rectification.
Issue 3: Laches
Mr Edelman submitted that even if the defendants might have had a case to rectify, it was now too late to do so and that the equitable doctrine of laches operated to debar the defendants from whatever might have been their rights to invoke the equitable remedy of rectification. In this connection, the plaintiffs relied on three main factors: delay, acquiescence and prejudice.
The delay concerned was the lengthy period from 1966 down to the time of these proceedings, commenced by the plaintiffs in 1995, in which the defendants for the first time raised a case of rectification in their points of defence. In particular the plaintiffs emphasised the delay after August 1969 when, by reason of the correspondence with DAC, the defendants were put on notice that Dr Smither, speaking as a medical expert, and DAC, speaking as lawyers, advised of the distinction between mesothelioma and asbestosis for the purpose of the pneumoconiosis exclusion.
The plaintiffs also relied on that correspondence, and the consideration given to it internally by the defendants as evidenced in particular by Mr Knight's memorandum of 20 August 1969, to emphasise the element of acquiescence. After all, having read Dr Smither's opinion that mesothelioma was distinct from asbestosis, and having been advised by DAC that mesothelioma should be specifically and additionally excluded from policies which excluded the risk of asbestosis, the defendants considered but rejected the possibility of clarifying the matter with the plaintiffs on the ground that such an attempt "might only lead to contentious argument". They trusted to the thought that the plaintiffs would not wish "to take advantage" of the situation. They therefore plainly contemplated the risk that they would find themselves on the wrong side of a legal (or commercial) argument, but considered themselves justified in assuming that it would not come to a dispute.
As for prejudice, the plaintiffs pointed to the deaths of senior officers who may have been involved in discussions and negotiations with Muir Beddall and the defendants in setting up the policy, such as those of the then chairman of Cape, Mr Dent, and its technical director, Dr Gaze; and also relied on the absence of recollection of others who are still alive but unable to contribute any evidence, and on the destruction or loss of relevant documents on the part of the defendants which has occurred.
The delay which has occurred since 1969 is indeed very great, but has to be viewed against the background that, because of the lengthy latency period of mesothelioma, the testing of the point of construction at the heart of the rectification claim was in the normal course of things perhaps likely to be long delayed. It seems to me, however, that that consideration is double edged: on the one hand it helps to explain and mitigate the delay, but on the other hand it demonstrates the danger of acquiescence in failing to bring the issue to a discussion at an earlier stage.
In my judgment it is the element of acquiescence involved in the defendants' attitude of August 1969 which is the striking feature of this issue. If the question had been raised with the plaintiffs in 1969, the matter would have been sorted out, one way or the other, at that time. In the meantime, a contract which was renewable at annual intervals still had several years, as it happened, to run before being overtaken by the change in 1972. In such circumstances it seems to me that a claim to rectify, once the issue is known, should be advanced without delay. It may be different where the situation is no longer dynamic: but where the terms of a current, renewable, contract have yet to be defined by an issue of rectification, there is an analogy, in my view, with remedies such as rescission or the acceptance of a repudiation.
Mr Palmer nevertheless submitted that the 1972 negotiations resulting in the fronting arrangement would have comforted the defendants that they were justified to rely on an understanding that the plaintiffs would not want to look to them for mesothelioma cover. In this connection he points to the way in which "pneumoconiosis" was used in correspondence and internally, as well as in the letter of 11 July 1972, as a catch-all expression for asbestos related risks in general; and submits that the only difference before and after 1 January 1972 was that after that date the defendants took the risk of the plaintiffs' insolvency.
It is true that letters at this time passing from Muir Beddall to both parties refer to the "pneumoconiosis risk"; that the defendants' letters to Muir Beddall and their internal documents likewise use the word "pneumoconiosis" to describe the cover for which compulsory insurance is now to be required by the 1969 Act; and that this is carried through into the contractual letter of 11 July 1972 itself. On the other hand, it is also clear that by this time the defendants were conscious that, however much the term "pneumoconiosis" might be used as a shorthand, conditions other than pneumoconiosis, such as mesothelioma and lung cancer, had to be separately specified. Thus an internal memorandum of the defendants dated 22 December 1971 says
"If we do enter into such an arrangement, we would have to ensure that asbestosis and mesothelioma claims were met by the Insured...";
and another such memorandum dated 23 December 1971 speaks of "lung diseases" generally. The same memorandum is illuminating in that it speaks in the same breath of the need
"to word the policy to include the Pneumoconiosis risk, but to get a full indemnity from the Insured in respect of such risk..."
This is illuminating because what emerged from the defendants at the end of February 1972 was a draft of the letter which ultimately became the letter of 11 July 1972 accompanied at the same time by a draft of what ultimately became memorandum 3 (although there in draft form referred to as "Memo 1"). Whilst the letter spoke in terms of "pneumoconiosis", the memorandum dealing with the cross-indemnity spoke of "pneumoconiosis, mesothelioma and cancer of the lungs associated with pneumoconiosis". It is clear therefore both that the defendants were conscious of the need to deal separately with mesothelioma, and that "pneumoconiosis" in the letter is used as a shorthand for the fuller phrase in the memorandum rather than as a catch-all for all asbestos related diseases. In my judgment, therefore, the circumstances of the change which occurred in the policy as from 1 January 1972 do not support Mr Palmer's submission, but emphasise that the defendants continued to be conscious of and concerned about the potential difference between pneumoconiosis and mesothelioma.
Indeed, Mr Edelman was entitled to riposte by way of reference to the Eagle Star litigation of the early 1980s: the defendants knew that there was a dispute between the plaintiffs and Eagle Star on this very issue of whether pneumoconiosis embraced mesothelioma, but they still did not seek to resolve the issue with their own insured. This was despite the fact that the defendants recognised, in Mr Robinson's letter to Eagle Star dated 12 November 1984, that "Unfortunately some of the documents could be dangerous".
The position therefore comes to this: the delay is very long, the prejudice is of the general and unspecific and therefore uncertain kind which is the concomitant of delay but which cannot be ignored, and the element of acquiescence is central and important. It is in these circumstances that I am required to find the "balance of justice or injustice" (Lindsey Petroleum Co v. Hurd (1874) LR 5 PC 221 at 239 per Lord Selborne, Erlanger v. New Sombrero Phosphate Co (1878) 3 App Cas 1218 at 1279 per Lord Blackburn) upon which the issue turns. The finding of such a balance in the hypothetical situation in which I am put by my holding that the defendants are not entitled to rectify the policy in any event is particularly difficult: but doing the best I can, I would express the opinion that, even if I had been prepared to hold otherwise on the issue of rectification, it would not be just to ignore the defendants' delay and acquiescence.
The plaintiffs did not in this context, as distinct from the context of affirmation as an answer to non-disclosure, rely on the defendants' payment of mesothelioma claims in the early 1990s. It would seem to me, however, that such clear and positive acquiescence, in the light of the background of August 1969, ought to make it particularly difficult to resist the riposte of laches as a bar to rectification. However, I have not relied on this aspect of the matter in forming the opinion I have expressed above.
Issue 4: Estoppel by convention or acquiescence
To a large extent this covers the same ground, but the question is rephrased. Instead of the issue being whether the defendants are entitled to rectify on the basis of a common contractual understanding which the parties have failed to carry through into expression in the policy, the issue is whether the plaintiffs are estopped from denying a common assumption, or whether it would be unconscionable to permit the plaintiffs to deny their acquiescence in the defendants' understanding, that the pneumoconiosis exclusion embraced mesothelioma.
In essence, therefore, it is submitted by the defendants that the parties dealt with one another on the basis that mesothelioma, together with all asbestos related disease, was within the exclusion. For these purposes Mr Palmer referred me to Amalgamated Investment & Property Co Ltd v. Texas Commerce International Bank Ltd [1982] 1 QB 84, and in particular to the emphasis there by Robert Goff J on the flexibility of the doctrine of equitable estoppel (at 103A) and to the statements of principle by Lord Denning MR at 121. He also referred me to restatements of doctrine set out in The Indian Grace (No 2) [1996] 2 Lloyd's Rep 12 at 20, concluding in the dictum of Staughton LJ (giving the judgment of the court) that -
"In our judgment it is essential that the assumption be agreed for there to be an estoppel by convention; but agreement need not be express and may be inferred from conduct, or even from silence."
In sum, Mr Palmer accepted that the following conditions must be shown to exist:
(1) a shared assumption, which must "cross the line" between the parties
(2) as demonstrated by mutually manifest conduct, which if not a matter of contract must be something very close to it.
In this regard Mr Palmer accepted that there was no evidence that the word "mesothelioma" had been exchanged between the parties (at any rate up to August 1969) and that there was nothing in writing as to the alleged common assumption or as to the plaintiffs' acquiescence in any assumption on the part of the defendants. He nevertheless relied on three elements as crossing the line: first, the plaintiffs' desire communicated to the defendants to handle all asbestos related claims themselves; secondly, the fronting arrangement of 1972 which he submitted was designed to continue the previous exclusion in the form of the cross-indemnity and expressly embraced mesothelioma, thereby indicating that mesothelioma had been within the previous exclusion; and thirdly, the plaintiffs' non-disclosure of mesothelioma claims, something which, had mesothelioma not been excluded, would have been in breach of their duty of good faith to disclose.
The plaintiffs' desire to handle all asbestos related claims in house was referred to in the evidence of Mr Banham and Mr Cross. Mr Banham, who was too ill to attend trial and who was therefore not cross-examined, said that although he could not be sure about precise dates, he had a clear recollection that the plaintiffs wanted to be in complete control over asbestos related claims. Mr Cross's evidence to this effect related to the time when the issue of whether the pneumoconiosis exclusion embraced mesothelioma arose in August 1969: it is clear from Mr Knight's memorandum dated 20 August 1969 that the issue was then discussed with Mr Cross.
I accept that as a matter of fact the plaintiffs handled all asbestos related claims themselves. However, that does not appear to have been the contractual arrangement at the beginning of the policy, for an internal memorandum of the defendants dated 3 February 1966, which bears Mr Robinson's initials on it, contained the following passage:
"Discussions have taken place at Head Office with the Assistant Secretary of this particular firm, Mr Rendall, in relation to claims handling procedure. The firm [Cape Insulation and Asbestos Products Ltd] is the largest subsidiary in the group. Hitherto it has been the practice for all correspondence in relation to claims to be routed through the London office...but we have persuaded Mr Rendell to adopt our usual procedure."
That appears not to have happened, however, for in another internal memorandum dated 16 May 1968, also bearing Mr Robinson's initials, the following is found:
"However, since then it has become the practice of the Insured to instruct their own lawyers to deal with these claims on their behalf and of course we have been content."
It follows that the position relied on by Mr Palmer and referred to by Mr Banham and Mr Cross was not established from the inception of the policy. This can be distinguished from the situation as at 1972 when clause 2 of the 11 July 1972 letter regularised the position by expressly providing that the plaintiffs would deal with all claims themselves (other than in the case of Small & Parkes). In the circumstances I cannot accept that Mr Banham's and Mr Cross's evidence relates to the commencement of the policy in 1966 as distinct from some later period. It is significant, however, that within little more than a year of the memorandum of 16 May 1968, the issue about pneumoconiosis and mesothelioma had arisen in August 1969. Moreover, no mesothelioma claim ultimately relied on by Mr Palmer had in any event been raised against the plaintiffs prior to 1969. I have set out the details of such claims above under the section of my judgment headed "Mesothelioma claims during the 1966/1971 period". None of these claims could have led to a claim under the policy, given the latency period of the disease. It follows that there is no evidence that the plaintiffs in fact handled a mesothelioma claim in house prior to 1972 which, on the basis of the construction of the pneumoconiosis exclusion for which they now contend, they ought to have referred to the defendants under the policy. In the meantime by August 1969 the defendants were themselves on notice that there was a substantial argument that mesothelioma was not excluded from cover and that the raising of such an issue "might only lead to contentious argument". I find nothing in this first matter on which Mr Palmer relied to support the plea of estoppel.
Mr Palmer's second matter was the fronting arrangement for 1972. However, I do not see how that can throw any light on the parties' intentions six years earlier. On the contrary, the express reference to mesothelioma in memorandum 3 to my mind indicates that the parties were conscious of the need to clarify something that had hitherto been left uncertain. Mr Palmer relied on the fact that in November 1971, while preparing for the new regime in the following year, the plaintiffs included the Moon, Ford and Sibbons claims under a schedule provided to the defendants of "Industrial Disease Claims" handled from 1959 to 1971. That schedule was discussed at a meeting between representatives of the parties on 10 November 1971. Mr Banham was at that meeting. He discussed the meeting in an internal memorandum of 17 November 1971 in which he referred to such claims as "asbestosis" claims. I cannot regard such references as being of any particular help. What was being discussed was the possibility of total cover for asbestos related claims pursuant to the 1969 Act; see further under "The 1972 amendments" above where the plaintiffs' schedule and Mr Banham's memorandum are discussed. In any event, it was Mr Palmer's general theme, based in part on the defendants' letter dated 28 January 1972 (the one which I have found above was never sent to the plaintiffs), that the only practical difference between the pre 1972 policy and the subsequent policy was that the defendants were taking the risk of the plaintiffs' insolvency. However, I disagree. The critical difference for present purposes is that whereas the 1966 policy contained a pneumoconiosis exclusion in terms which went back to 1948, the 1972 policy contained a cross-indemnity which referred expressly to mesothelioma, as one might expect in the light inter alia of the fact that mesothelioma was now a separate prescribed disease.
The third matter relied on by Mr Palmer was the plaintiffs' alleged non-disclosure relating to mesothelioma cases. I shall revert to the plea of non-disclosure below. For present purposes it will suffice to make the point that there is no evidence that the defendants relied on the absence of disclosure of mesothelioma claims so as to form a view as to the scope of the pneumoconiosis exclusion, or that the plaintiffs consciously addressed their minds to such non-disclosure, or had any idea as to the defendants' attitude to them. Silence, where there is a duty to speak, may well sound itself as loud as words, but in the present instance there is no indication that anyone was listening. Indeed, the non-disclosure point as a whole was accepted by Mr Tempest as something of a lawyers' point. In so far as one may speculate at all as to why such claims were not disclosed on renewal in 1970 and 1971, if they were not, the only safe inference would be that at the time they were not sufficiently distinguished from the asbestosis with which they were associated. As I have found above, the Dalgleish claim was not recognised as involving mesothelioma until 1971, the Ford claim was originally put as a matter of asbestosis, and the Sibbons, Moon and Killyleigh deaths were clinically ascribed to mesothelioma caused by asbestosis.
In sum, therefore, I find that there was neither a shared assumption, nor mutually manifest conduct, upon which a claim for an estoppel may be based. In truth, the defendants were far from sharing any assumption, or from indicating any understanding in which the plaintiffs acquiesced. From August 1969 they were conscious of an issue which in 1972 they sought to put behind them as from that policy year. In 1982 they recognised that their position was "insecure" (Mr Robinson's manuscript on the memorandum of 5 October 1982). By 1984 they knew that the plaintiffs were in litigation with Eagle Star concerning this very issue. On 12 November 1984 Mr Robinson wrote to Eagle Star that "some of [Iron Trades'] documents could be dangerous". By May 1985 the defendants had received the plaintiffs' first mesothelioma claim, and in May 1990 the defendants had accepted the plaintiffs' Roberts claim for mesothelioma. In these circumstances I do not see how it can be said that the parties shared any assumption or that the plaintiffs are in conscience estopped by any acquiescence.
Issue 5: The letter of 28 January 1972
The issue here is a point on construction of this letter which the defendants rely on as an agreement between the parties that they should have no liability thereafter for claims arising from any asbestos related disease. The letter begins as follows:
"In accordance with your wishes, the pneumoconiosis risk of the Cape Group of Companies, with the exception of Small & Parkes Limited, has been excluded from the policy cover. From the 1st January 1972, by reason of the Employers Liability (Compulsory Insurance) Act, 1969, it is necessary for you to insure the pneumoconiosis risk as you are not within the categories of employers exempted by the Act, nevertheless it is still your wish to deal with pneumoconiosis claims without conventional insurance arrangements and accordingly we have entered into an agreement in the terms outlined below."
In this context the passage relied on in the letter by the defendants is as follows:
"Legal advice has been received by the Association and yourselves to the effect that the Employers Liability (Compulsory Insurance) Act, 1969, does not require employers to cover liability which has arisen from exposure in disease producing processes prior to the 1st January 1972 and with the exception of Small & Parkes Limited it is agreed that the Association will not incur a liability for the payment of damages or legal costs in relation to employees of the insured companies or others in relation to exposure up to the end of 1971, whether or not this relates to the total or only part of the period of exposure."
I have already found that this letter was never sent by the defendants to the plaintiffs. That finding is sufficient to deal with this issue, but I will address the point of construction in any event.
Mr Palmer submits that the effect of the wording "will not incur a liability...in relation to exposure up to the end of 1971" is to remove any liability which may have existed under the earlier years of the policy for any asbestos related disease and to do so retrospectively.
In my judgment, however, this wording does no such thing. There is no sign of any language there which has overtones of, let alone express reference to, the retrospective removal of liability which had previously existed. On the contrary, the context is the future period of the policy subject to the changed regime of the 1969 Act, and that context is emphasised in language such as "will not incur", which is not the language which one would expect to find used to effect a retrospective exemption. It seems to me that what this passage is doing is to ensure that nothing by which the defendants accept for the future a liability to insure the plaintiffs' pneumoconiosis risk is to prejudice for the past the defendants' exemption.
Mr Palmer also relied on this letter and in particular that passage in it for a general submission that the 1972 policy change was only one of form, and not of scope of the exclusion/indemnity. It seems to me that in the light of memorandum 3 that submission becomes impossible. It is to be noted that the origin of memorandum 3 is to be found already in the letter of 28 January 1972, where the defendants stipulate that in consideration of the inclusion in the policy cover of pneumoconiosis the plaintiffs are to -
"Pay all damages...in respect of claims arising from pneumoconiosis, mesothelioma, and cancer of the lungs associated with pneumoconiosis..."
Issue 6: Non-disclosure
The defendants' reliance on non-disclosure is of course an alternative defence, which only comes into operation on the hypothesis, which I have held to be the case, that the plaintiffs were covered under the policy during 1966/1971 for the risk of mesothelioma.
In the end, as I have remarked above, the defendants' non-disclosure case came down to reliance on the plaintiffs' failure to disclose for the purpose of the 1970 and 1971 policy year renewals a small number of claims that had been brought against them for mesothelioma or rather mesothelioma caused by asbestosis.
The defendants relied on five such claims: those of Ford, Dalgleish, Sibbons, Moon and Killyleigh. I refer again to what I have said above about such claims under the section of my judgment headed "Mesothelioma claims during the 1966/1971 period".
The Ford claim, which was notified in 1968, was the only one to have been raised early enough to affect the 1969 renewal, but on further consideration Mr Palmer accepted that there was no evidence to show that there had been any mention of mesothelioma, as distinct from asbestosis, prior to 1969. It will be recalled that this claim had been notified to the plaintiffs on 18 October 1968 as a case of asbestosis, and was settled on 28 November 1969. It appears on the plaintiffs' 1993/94 database as a mesothelioma claim, but on what basis it is impossible to tell. If, however, the plaintiffs' database is accepted as accurate, it can be regarded as a 1969 claim affecting the renewal in 1970.
The Dalgleish claim is only entered on the plaintiffs' database as a claim raised on 29 October 1971. On that date a solicitors' letter to the plaintiffs merely referred to "asbestosis". It may be recalled that a different firm of solicitors had originally written to the plaintiffs on 5 February 1969 referring to "cancer stemming from asbestosis" and requesting assistance as distinct from making any claim: there was no mention of mesothelioma, and the request was not regarded as a claim, for it was only entered on the database as a claim raised in October 1971. Ultimately, at a time which cannot now be identified but which I would infer was after October 1971 and before the claim was settled on 28 December 1972, the cause of death was recognised as mesothelioma caused by asbestos. In my judgment this claim cannot assist the defendants, for it cannot in any event be regarded as arising before 1971.
The Sibbons claim is also entered on the plaintiffs' database as one of mesothelioma caused by asbestosis. A writ was issued on 25 March 1969 alleging "asbestosis leading to mesothelioma of the pleura". However, it will be recalled that the first defendant to that writ was another of Iron Trades' insureds, Darlington. Thus the defendants knew about this claim and that it had been brought against the plaintiffs as well. It seems to me that the defendants cannot complain about non-disclosure of this claim, for they knew about it in the ordinary course of their business.
The Moon claim was notified on 16 May 1969 as a case of "mesothelioma asbestosis" and the Moon post mortem referred to cause of death as peritoneal mesothelioma caused by pulmonary asbestosis. The claim was already settled by 16 October 1969 and the plaintiffs' database refers to it simply as a case of mesothelioma. The only other of these five claims which is referred to in this way in the database as a case of mesothelioma without reference to asbestosis is the Ford claim. It is not clear why the database in the case of Moon does not reflect the terms of the post mortem findings, and this uncertainty must in turn undermine the database reference in the case of Ford to mesothelioma without further reference to asbestosis as its cause.
The Killyleigh claim is known only from the plaintiffs' database - nothing else is known about it. It was first raised on 6 November 1969 and settled on 18 December 1972. It is recorded as a claim arising from death caused by mesothelioma due to asbestosis. Mr Palmer acknowledged that he could not rely on this claim, as he could not show that the plaintiffs knew of any mesothelioma connection prior to 1971.
In sum, therefore, the defendants can rely on only two undisclosed claims, those of Ford and Moon, both of which fall to be dealt with as 1969 claims. The other three cases of alleged non-disclosure, the claims of Dalgleish, Sibbons and Killyleigh, fail for the reasons stated above. In any event, all of those three were notified and treated in the database as cases of mesothelioma caused by asbestosis.
The Ford and Moon claims were both settled in 1969. The employment period in the case of Ford was between 1937 and 1957, and in the case of Moon was between 1943 and 1961. The settlements were in the sums of £5,125 and £4,367, plus in each case a few hundred pounds in costs. Although the claims are recorded in the database as cases of simple mesothelioma, the notification in the Ford claim was of asbestosis without any mention of mesothelioma, and the notification and post mortem in the case of Moon was of mesothelioma caused by asbestosis. It is impossible to tell why these claims were recorded in the database as cases of simple mesothelioma. In my judgment, these entries cannot be regarded as reliable to the extent that they omit reference to asbestosis. In as much as there was an exclusion of pneumoconiosis and therefore of asbestosis, I do not think that claims based on asbestosis causing mesothelioma would be a matter for disclosure, but I will assume that such cases should be treated as if they were claims arising out of simply mesothelioma.
Did the plaintiffs' fail to disclose these two cases in breach of their obligation of good faith, so as to entitle the defendants to avoid the policy? It is a slim basis for so serious a remedy, but if it is a good one, then subject to waiver or affirmation, it must succeed.
I would accept that, other things being equal, cover for mesothelioma would entail an obligation on the part of the plaintiffs to disclose their mesothelioma claims experience, even in respect of periods pre 1966 for which the defendants were not in any event liable. In other words I would accept the underlying materiality of this information.
On the other hand, consideration also has to be given to what as a matter of general principle need not be disclosed by an assured; to what on the facts of a particular situation may fairly be said to have been waived by an insurer for disclosure; and to the need for an insurer to prove inducement as well as materiality. Thus, as Lord Mansfield CJ said in Carter v. Boehm (1766) 3 Burr 1905 at 1911 -
"There are many matters as to which the insured may be innocently silent. He need not mention what the underwriter knows: what way soever he came to the knowledge. The insured need not mention what the underwriter ought to know: what he takes upon himself the knowledge of: or what he waives being informed of...and either party may be innocently silent as to grounds open to both to exercise their judgment upon."
As for the importance of inducement, the leading case is Pan Atlantic Insurance Co Ltd v. Pine Top Insurance Co Ltd [1995] 1 AC 501.
In the present case, by the time of the 1970 renewal, the defendants knew: that mesothelioma was a separate prescribed disease; that the plaintiffs had been sued together with Darlington on the Sibbons claim; that BBA, another of their insureds, had also received a mesothelioma claim (in the name of Haldenby) in 1967; that the claim which had initiated the August 1969 correspondence itself was another mesothelioma claim; and thus that mesothelioma claims were endemic in the industry in which they had extensive experience as insurers. Indeed, a memorandum of 11 December 1970 shows them to have been in touch with Dr Smither and Mr Kaye of DAC in the context of another non-Cape mesothelioma claim. The defendants therefore knew that the plaintiffs had received at least one mesothelioma claim (the Sibbons claim) and were likely to have received others, and that they were susceptible to liability in respect of them.
The question therefore is whether there was anything unusual about the level of claims which the plaintiffs were receiving at this period: and in this context it is relevant again to observe that the defendants' non-disclosure case amounts to only two claims falling in 1969. It is also relevant to ask how disclosure of such cases would have been made, if they had been made. The answer to that is clear: all that the defendants required, and this was as true of Small & Parkes[5], with its pneumoconiosis cover, as of the other Cape companies within the policy umbrella, was a general calculation of the cost of claims paid and of an estimate for unsettled claims, as well as an estimate of the wages payroll. Thus the defendants did not require Smith & Parkes, on renewal, to separate out their pneumoconiosis exposure. It follows in my judgment that not only did the defendants waive separate disclosure of any mesothelioma liability, but they cannot even prove that the plaintiffs failed to include the allegedly undisclosed Ford and Moon claims within their renewal returns.
It also follows that the defendants cannot prove inducement. Normally, inducement may be presumed in the sense that it would be for the insured to rebut the prima facie presumption that a material disclosure would have influenced the underwriter. In the present case, however, there is no sign that the disclosure of the Ford and Moon cases would have influenced the defendants in any way. If it would have done, I think it is for the defendants to prove that that was so, by calling the underwriter concerned: but that is something that the defendants have not done.
For these reasons, the defendants' non-disclosure case in my judgment fails.
Issue 7: Affirmation
The last issue assumes that the defendants had made good a case of non-disclosure entitling avoidance of the policy, at any rate from the 1970 policy year, and asks whether the defendants had nevertheless affirmed the policy with knowledge of the non-disclosure.
The affirmation relied on is the payment of mesothelioma claims in the 1990s. Ex hypothesi, however, the non-disclosure of the Ford and Moon claims only emerged in the course of this litigation, after the 1990s claims had been met. It follows that at the time those claims were paid, the defendants did not have the requisite knowledge to turn their payments into an affirmation.
Having said that, however, I would remark in passing that the payment of the mesothelioma claims in the early 1990s underlines the thinness of the non-disclosure case. The defendants were paying claims when they knew or ought to have known that the plaintiffs must have had or very probably would have had earlier claims against them based on mesothelioma in respect of periods prior to 1966, and that there had been no specific separate disclosure of such claims experience. If they had considered that such non-disclosure would have entitled them to avoid the policy, they should have said so.
Conclusion
It follows that in my judgment the plaintiffs are entitled to a declaration that the defendants are not entitled to refuse to indemnify the plaintiffs against their liability in respect of the 1966/1971 years for claims against them in respect of pain, injury, loss and damage suffered by reason of the claimants developing mesothelioma.
Note 1 albeit entered in the database as one of mesothelioma. [Back] Note 2 albeit in the Moon case the database refers only to mesothelioma. [Back] Note 3 It may be, however, that strictly speaking Universal had been brought within the policy on the basis that the exclusion did not apply, albeit that appears to have changed in 1972, after which only Small & Parkes stood outside the cross-indemnity arrangements. [Back] Note 4 See above under "Mesothelioma claims during the 1966/1971 period" and below under "Issue 6: Non-disclosure". [Back]